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Trusted Advantage in Slot Auctions

Julian Ma

Robust Incentives Group @ EF

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No Trusted Advantage: an ePBS Desideratum

No Trusted Advantage

The beacon proposer is incentivized to use the in-protocol commitment to commit to the block producer that maximizes the proposer’s utility

Will the proposer use ePBS or will it run MEV-Boost when the execution payload must be revealed?

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Slot Auctions Model

Consider a simple model with the following agents and choices:

  • The proposer chooses whether to auction at t = 0 or at t = 6.
  • Builders bid to maximize their payoffs.

Each builder has a distribution of block values it may realize.

  • At t = 0, the builder only knows its distribution of block value, Vi ~ f.
  • At t = 6, the builder knows its block value, vi.

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Slot Auctions Model

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If the proposer chooses to auction at t = 0:

Builders bid according to their expected value of the block value

If the proposer chooses to auction at t = 6:

Builders bid according to their realized block value

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Slot Auctions Model

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If the proposer chooses to auction at t = 0:

Builders bid according to their expected value of the block value

If the proposer chooses to auction at t = 6:

Builders bid according to their realized block value

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Key insight: the second highest order statistic of realized values is likely higher than the expected block value!

The proposer chooses the late auction: There is a Trusted Advantage

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Underlying Assumptions

  • This model relies on two assumptions:

✅ The proposer can use MEV-Boost to sell the execution payload construction rights

❓Builders cannot (effectively) resell execution payload construction rights via MEV-Boost

  • True Result: The No Trusted Advantage of Slot Auctions depends on the state of the secondary market

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My Opinion

  • Whether slot auctions will be used is very fragile
  • Examples:
    • If the secondary market attracts fewer bidders if builders run the auction, then proposers will not use the ePBS auction but use MEV-Boost instead.
    • If proposers are less risk averse than builders, proposers will not use the ePBS auction but use MEV-Boost instead.
  • Assuming that the presented argument and assumptions hold, I believe slot auctions will either be used almost 100% or almost 0% of the time.
    • Once we are in one regime, it will be difficult to move to another.

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What do we need to know to decide on block or slot auctions?